Early Mistakes Hurt iPhone’s Potential

Apple has committed two “meaningful errors” since launching the iPhone in 2007, argues Piper Jaffray analyst Gene Munster. He notes that at first, Apple did not get subsidies for the iPhone, keeping the cost as high as $599 for an 8GB model. That price soon dropped to $399 however, and an 8GB iPhone 3GS can now be bought for $99. The most expensive current model, a 32GB version of the iPhone 4, is still only $299. Initial prices likely hurt the iPhone’s appeal, Munster suggests.

The other major mistake is said to have been signing an exclusive agreement with AT&T. Although the deal is on the verge of ending, the choice of carrier is said to have hampered demand. “We expect Apple to correct this issue by the end of [the first half of 2011] and add Verizon to the list of carriers that sell the iPhone in the US,” says Munster.

Exclusivity is the only reason Android phones are outselling the iPhone in the US, the analyst claims. “As an example, in countries where the iPhone is available on multiple carriers and competes with Android, we see the iPhone outselling Android,” he says. “The greatest factor in the success of Android has been Verizon. Customers are loyal to their carrier, and once Verizon gets the iPhone, we believe Android’s success in the US will be tested.”